The G4S fiasco surrounding security for the London Olympics has sparked debate about the problems of contracting out. In a new book, John Alford and Janine O’Flynn argue for a broader approach to utilizing external providers as the key to avoiding or at least minimizing the pitfalls

Even after decades of public management reform, ‘one-size-fits-all’ solutions still bedevil government. For all the talk of output focus, customer orientation and performance management, strait-jacketed thinking has still narrowed the possibilities for better public services.

In our new book, Rethinking Public Service Delivery, we offer a broader set of choices for delivering services, going beyond government bureaucracy at one extreme and privatisation or contracting out at the other. We shine a spotlight on emerging practices that expand the range of external service providers and the roles they play. We look not only at firms and non-profits as providers, but also at volunteers, other government agencies, clients and even those subject to regulation as potential contributors to social outcomes. And we consider different ways of encouraging good performance by providers, going beyond carrots and sticks.

These wider possibilities haven’t got nearly as much attention as they should. Instead, for a long time government choices stemmed from political ideology. Some governments mostly opted for privatisation, whereas others tended to keep and indeed build up bureaucracy – both ‘one-best-way’ solutions. More recently, good public managers have sought to weigh up the costs and benefits, focusing on ‘value for money’. However, often they confine themselves to a narrow idea of benefits and costs.

In our view, these decisions should rather be based on a broader understanding of the benefits and costs. A better answer to the question of whether to privatise is not ‘Almost always’ as conservatives argue, nor ‘Hardly ever’ as the left says, but rather ‘It all depends’ – specifically, on whether the benefits outweigh the costs.

And here lies our special message: the benefits and costs involve more than just whether the service is better or cheaper. There are other costs that must also be weighed up in deciding whether to hand work over to an external provider.

Some of these costs arise from the fact that there are two or more organisations involved that want different things – for example, the service purchaser may want a good service at a low price, while the provider wants to cut corners on service and charge a higher price. But somehow they have to co-ordinate what they do so that the service works.

This means that time and effort will have to go into choosing a good supplier, spelling out what service is required, monitoring performance, and applying penalties or rewards. This is not so hard in services where there are lots of competing providers, and the service is easy to describe and measure. But where there’s a monopoly supplier, and the service is complex, it’s harder to hold the provider to account.

Other costs arise because handing the service over to an outsider means the government organisation loses a core competence which, once gone, is hard to retrieve. Many government agencies have learnt the hard way about the folly of handing over the system design aspect of big IT projects. And once a big project like public transport ticketing starts to malfunction, the government is a prisoner to the millions of dollars that have already been sunk in it.

In some services, it’s also a potential problem if enlisting external providers involves handing over the power to use legal authority or coercive force. Think about the many incidents of misuse of force in privatised detention centres or prisons, or even with bouncers at night venues. The staff involved are subject to different incentives than sworn law enforcement officers.

So instead of ‘one best way’, we need to follow some decision rules for choosing among different types of service-provision. But we also need to use more up to date ways of encouraging the best performance from external providers once they have been engaged.

Once again, this means going beyond the conventional wisdom – such as the use of financial carrots and sticks – to a broader menu of ways to motivate and facilitate good performance. In particular, building trust between public agencies and non-government organisations can be more effective at this than rewards and penalties.

To make this happen, government agencies can be reshaped and equipped to better handle external providers. It calls for staff to be recruited and trained not only to deliver services themselves, but also to mobilise external parties to play their role as well. And it means that much of the red tape which gets in the way of collaborating with other organisations must be peeled away.

John Alford is Professor of Public Sector Management at the University of Melbourne and the Australia and New Zealand School of Government. His previous book, Engaging Public Sector Clients: From Service-Delivery to Co-production, Palgrave Macmillan 2009, won the SPAR Award of the American Society for Public Administration for the best public administration book.

Janine O’Flynn is Associate Professor in the Crawford School of Public Policy, Australian National University, and Adjunct Faculty member, ANZSOG.

Remember the Olympic Security contract was NOT designed, tendered and procured by Government. G4S was neither selected nor contract managed by Government. This was all done by LOCOG “a private company operating independent of Government”.

This is an example of where one private sector organisation has failed to manage their supply chain and in the public interest the public sector have stepped in. LOCOG a decision to award a contract to G4S rather than say provide the security workforce themselves (akin to how they have managed their 70,000 strong volunteer force themselves) or approach the MoD / MPS in the first instance to provide the service.

Apologies for the tangent, but I would have bought the book on the basis of this post if it had been available on kindle; I have a much higher decision threshold for importing yet more paper to my overcrowded bookshelves, which is then much less likely to get read. I do find it extraorindary that a newly published book should not be made available in electronic form, particularly from Macmillan, some of whose other imprints are at the leading edge of this kind of stuff.

But thanks anyway for this interesting taster – this more pragmatic approach sounds entirely sensible, and links perhaps to the idea of zero-based service delivery: if a government (or any other) service delivery organisation were to have no delivery capabailty, what would be sensible to develop and deliver internally, and what would it better to deliver through external suppliers.